DSC s entry into the E P sector NELP VII

DSC’s entry into the E&P sector NELP VII

Agenda ¡ DS Objectives and Strategy ¡ NELP VII Objectives and Strategy ¡ Action Plan

DS Objective & Strategy for Oil ¡ DSC Board’s Objectives for E&P l l l ¡ Cash multiple of X times by which year? IRR of 25% by Year 8 NPV of X $ million by which year? Strategy l l l Entry into Indian Oil Industry through NELP VII Acquisition of Acreage/blocks in order hopefully to discover reserves (!) Commitment of $200 million (? ) ¡ l l Over 7 -8 years Form JVs with experienced E&P Companies Manpower, Systems & Software ¡ Outsource first and then build In-house

DS Objective & Strategy for Oil ¡ Initial Strategy l Active JV Partner vs Sleeping Partner? ¡ Depends on partner l Working interest ¡ 90% [Naftogaz]; 20%? [OIL or other offshore operator] l How do we realise value? ¡ Farm out (i. e. sell part of working interest for cash, royalty or work done) ¡ Win revenue from production l Do we enter Production [delay the decision]

NELP Objective & Strategy ¡ Objectives l Acquire x blocks that imply capital expenditure of $y million (approx. $200 million? ) ¡ Say 5 blocks for a balanced affordable portfolio l ¡ ¡ But need to bid for say 10 blocks to win 5… Revised estimate of $225 million on exploration for 10 blocks (8 onshore) for typical winning minimum work programmes, expended over 7 -8 years (taken from analysis of NELP VI winners) Revised estimate of additional $57 m for 10 Blocks if one discovery is found on each of them (the obligatory appraisal programme in the Contract)

NELP Objective & Strategy ¡ Overall Strategy l l l Take a working interest of at least 80% for onshore blocks ¡ Willing to take minority interest in offshore blocks Joint venture with experienced Operators ¡ Sole risk on a few ‘S’ blocks? Active (lead) JV Partner where high working interest Leverage other partners’ technical teams to our advantage After award, spread risk by: ¡ Farm-in to additional 5 blocks by trading equity and/or paying cash and/or work ¡ Farm-out to other companies if DSC win too many blocks

NELP Objective & Strategy ¡ Detailed Strategy Analyse about 20 blocks in detail, ideally 25+ ¡ Latter achievable if help from JV partners l Bid on 10 blocks ideally (to win 5) ¡ Budget must cover winning all blocks (or farm out)! l Achieve maximum marks on the biddable Minimum Work Programme (MWP) l Achieve DSC’s minimum corporate hurdle IRR in fiscal package

NELP Action Plan ¡ Mobilise l ¡ Public information to pre-prioritise blocks for detailed study (starting now until Jan 8 th) l l l ¡ ¡ Teams, hardware, software, videocoms starting now Supplemented by contact with DGH View online data as soon as DGH makes it available Focus on the 38 onshore and shallow offshore Agreement with Naftogaz (onshore) Negotiate with OIL for offshore, but identify competitor offshore operators l OIL unlikely to collaborate on many blocks, or permit DSC significant working interest

NELP Action Plan ¡ Mumbai road showl ¡ ¡ ¡ Overview; potential JVs; networking Physical data rooml Jan 8 th hopefully Jan 10 th Objectives: finalise blocks for detailed analysis; fine tune additional data for purchase Purchase of data packages- from Jan 10 Interpret seismic and well data- Jan 10 th to Mar 10 th th l Identify possible hydrocarbon accumulations on each block analysed, their range of potential sizes, and the geological probability that they exist and are economic

NELP Action Plan ¡ Above information passed to Engineering (25 th Jan until 10 th Mar), who then deliver: l l l ¡ Recovery factor Production profile No. of wells Cost of wells and surface facilities and pipelines Schedule to first oil/gas Capital and operating cost schedules, and pipeline/processing tariffs Economic modeling (25 th Jan to 25 th Mar) l l Input assumptions (e. g. oil and gas price series; escalation) Basic cash flows PSC terms (easily adjustable) Any additional India- specific taxation

NELP Action Plan ¡ Outputs (1 st Mar to 31 st Mar) l l ¡ Economic metrics for various bid strategies (e. g. IRR, NPVX, EMV, Payback, maximum exposure) Range of potential hydrocarbons in place and probability of existence Cost of Minimum work programme for each favoured block Outputs according to bid rules and according to reality! Bid package suitable for submission (25 th Mar to 5 th Apr) l l Legal and taxations final due diligence Board presentations Internal decision making Submission to government

NELP Immediate Steps (in order of priority) ¡ ¡ ¡ ¡ Purchase I. H. S database ($70 k approx. for min. one year, and temporary export to Buenos Aires) NOW! Purchase/lease geophysics software ($55 k to $130 k, temp exp to BA) NOW! Purchase high end hardware for $60 k for temp export to BA) NOW! Review existing video conferencing hardware for compatibility and purchase two units for temp exp to BA and UK for $60 k (or borrow chairman’s in London? ) Resolve data upload capability in Delhi for use of video conferencing (bonded ADSL? ) Purchase/lease other software ($265 k to $500 k) for temp exp to BA Identify Indian academic to advise on petroleum geology of offered Blocks.

NELP Cost Estimate of Exploration and Appraisal Work Programmes (based on NELP VI winning bids)

Cost Estimate of Bidding Process